Among the priorities that fiscal authorities consult when drafting budgets, there is something called a "V project." It refers to budget projects in which the president takes a particular interest. When the president says at a Cabinet meeting that "securing graphics processing units (GPUs) must be accelerated," the compilation of related budget proposals gains momentum.
One of the projects classified as a V project in the 2027 main budget, which is currently under review, is said to be the "traditional market modernization project." President Lee Jae-myung, who enjoys visiting provincial traditional markets whenever he has time to hear the voices of merchants, instructed officials to "find ways to help traditional markets," and a review is now under way.
In truth, there is not much that can be done in the name of supporting traditional markets. Attempts such as introducing e-commerce to traditional markets have been made several times in the past, but they failed to proceed properly because of merchants' indifference and conflicting interests. Support must be increased, but there is no suitable way to spend the money, so a considerable budget is expected to be poured into replacing facilities such as awnings (ceiling-mounted sunshades).
The reason I have suddenly brought up traditional markets is that one issue on which President Lee has remained silent is significantly connected to traditional markets. That is the Homeplus problem, which has continued for one year and four months. Although President Lee actively speaks out on most issues in Korea, he has never issued a notable direct message on the Homeplus issue.
According to officials at the presidential office and economic ministries, President Lee appears to have decided to leave the Homeplus problem to market logic. Whether it be rehabilitation, liquidation, or a third alternative solution, the government will not step in directly to exert its influence.
In fact, seen through the eyes of the market, Homeplus is a "zombie firm" whose liquidation value exceeds its going-concern value. That is to say, it would be better to close down even now and hold a debt settlement with the remaining assets. Its core business competitiveness has already been damaged to the point where it can hardly pay even interest even if it earns money. Yet it is so large that it is completely excluded from the benefits available to small and medium-sized enterprises, which can be applied only to companies with revenue below 100 billion won and assets below 500 billion won. Had it instead been able to escape the shackles imposed on neighborhood "grocery marts," such as mandatory closures twice a month or restrictions on early-morning delivery, its situation might have been somewhat better than it is now.
The claim that the company was ruined by the leveraged buyout (LBO) of MBK Partners, a major private equity fund (PEF) manager, also runs counter to market logic. Borrowing money using the acquired company's assets as collateral to purchase the company and then repackaging it to generate profit is a basic mergers and acquisitions (M&A) strategy followed not only by MBK but by funds around the world. Nor does MBK belong to a particularly predatory form of capital that deviates from global norms.
But does that mean Homeplus should be left to go bankrupt like this? This, I think, is another matter. That is because not everything in the world runs on market logic alone. If Homeplus had been a local company rooted in some provincial region rather than a nationwide chain, if it had not been a large discount store standing on the opposite side of the ruling party's policy favoring traditional markets, if the playing field that had been tilted only in favor of e-commerce companies like Coupang and traditional markets had been just a little more level….
The final cause of Homeplus closing its doors is, in the end, that it failed to secure the 200 billion won needed for rehabilitation. That is the market logic put forward by MBK, a financial institution, and Meritz Financial, its largest creditor. I believe the first principle in restructuring should be market logic, not political logic. I also agree 100 percent with the argument that, for Korea to make a second leap, it must weed out zombie firms through bold restructuring and achieve selection and concentration of resources.
But behind market logic sit 12,000 Homeplus workers and tens of thousands of employees of tenant and partner companies. I hope that even a portion of the budget said to be going into traditional market modernization will be used for Homeplus workers. Workers who receive 600 million won each in annual bonuses on the back of the semiconductor cycle, and workers who lose their jobs pushed out by restructuring. Narrowing the gap between them is what the government must do now.
